LAW ON PRIVATIZATION Official Gazette of the RoS, No. 83 dated August 5, 2014

Transcription

1 LAW ON PRIVATIZATION Official Gazette of the RoS, No. 83 dated August 5, 2014 I GENERAL PROVISIONS Subject of the Law Article 1 This Law regulates the conditions and procedures for change of ownership over socially owned and public capital and assets. Definitions Article 2 Certain terms used herein shall have the following meanings: 1. Privatization in terms of this law is the change of ownership over capital and assets of legal entities that operate with socially owned and public capital. Privatization in terms of this law also implies the following: - Sale of shares and stakes that have been transferred to the Privatization Agency (hereinafter: Agency) after the termination of the agreement on the sale of capital concluded between the Agency and a buyer. - Sale of assets in companies where the agreement on the sale of capital has been terminated. - Sale of shares and/or stakes of the Shareholder Fund, as well as of the Development Fund of the RS and the Fund for Pension and Disability Insurance, when sold together with shares or stakes of the Shareholder Fund; 2. Public capital is the capital of the Republic of Serbia, autonomous province and local selfgovernment units; 3. Subject of privatization is: - Socially owned or public capital and assets in companies and other legal entities, including public companies and public capital in form of shares or interests; - shares and/or stakes after the termination of the agreement on the sale of capital; - assets of enterprises for which the agreement on the sale of capital has been terminated; - shares and/or stakes of the Shareholder Fund, as well as of the Development Fund of the RS and the Fund for Pension and Disability Insurance, when sold together with shares or stakes of the Shareholder Fund; 1

2 4. Privatization entities are enterprises, companies, and other legal entities undergoing ownership transfer, including public companies initiated for privatization; 5. Privatization models are the sale of capital, sale of assets, strategic partnership and capital transfer free of charge; 6. Privatization methods are public collection of bids with subsequent public bidding and public collection of bids; 7. Participant in the privatization process is a person who submitted an application for participation in the privatization process; 8. Buyer is a domestic or foreign legal or natural person who has been declared a buyer or an individual with whom a sales agreement has been concluded; 9. Strategic Investor is a domestic or foreign legal entity that has signed an Agreement on Strategic Partnership with a privatization entity, in this case, the Republic of Serbia; 10. Means of Payment are domestic or foreign convertible currency; 11. Letter of Interest is expressed interest in a particular subject and model of privatization containing basic information on the interested buyer or strategic investor, with proposed indicative price, investment program, tentative plan of operations and number of full-time employees, as well as other relevant information set forth by Public Invitation; 12. Fair Market Value is a fair value as defined by International Financial Reporting Standards 13 - Fair Value Measurement; 13. Method of public collection of bids with subsequent public bidding is a privatization technique for the sale of capital and assets of privatization entity based on bid submission and participation in public bidding procedure; 14. Method of public collection of bids is a privatization method that envisages the submission of bids for the selection of strategic investor; 15. The initial price for the sale of capital and/or assets shall amount to at least one-half of the estimated value of capital and/or assets, while the new starting price at the second collection of bids and public bidding shall amount to at least one-third of the estimated value of capital and/or assets; 16. Sale of capital is a privatization model whose subject of sale is public capital or socially owned capital undergoing privatization, shares and stakes after the termination of the agreement on the sale of capital concluded between the Agency and a buyer, as well as shares and/or stakes of the Shareholder Fund, and the Fund for the Development of the RS and the Pension and Disability Insurance Fund, when sold together with shares or stakes of the Shareholder Fund; 2

3 17. Assets Sale is a model of privatization that envisages the sale of assets or part of the assets of the privatization entity in the privatization procedure; 18. Asset Sale Program is a program on asset sale rendered by privatization entity and adopted by Privatization Agency within the time limit specified by this law; 19. Strategic Partnership is a model of privatization based on institutional interaction between domestic or foreign legal entities and privatization entity, or in this case, the Republic of Serbia, which is implemented through a joint venture by establishing a new company or the capital increase of the current privatization entity; 20. Establishment of a new company is the setting up of an enterprise, founded by the Republic of Serbia and a strategic investor, with a stake of the Republic of Serbia being the property acquired as claims against the privatization entity selected for strategic partnership, via the giving in payment (datio in solutum); 21. Capital increase of the current privatization entity is the increase of basic capital in a company subject to privatization for which the Government of the Republic of Serbia (hereinafter: Government) has adopted a decision on strategic partnership; 22. Strategic Partnership Agreement is a contract on the capital increase of the existing privatization entity concluded by the Republic of Serbia, a strategic investor and privatization entity, as well as the agreement on the establishment of a new company concluded between the Republic of Serbia and a strategic investor. 23. Transfer of capital free of charge to employees is the transfer of capital in privatization entity with socially owned capital that is being privatized through a capital sale model by transferring up to 30% of the capital to employees free of charge, in shares or stakes; 24. Transfer of capital free of charge to a strategic investor is the transfer of capital to an investor in case of positive business results, in accordance with regulations governing incentives for investments and based on a Government decision; 25 Measures for disburdening and the preparation of privatization entity are measures that may be set by the Government in case of privatization of the entity through the sale of capital or capital increase of the existing privatization entity, under the terms of this law. 26. Conditional Debt write-off is a measure for disburdening and the preparation of privatization entity according to which the state creditors undertake to write off the debt of the privatization entity that is operating entirely with majority socially owned or public capital, as of 31/12/2013. Debt write-off shall be valid if the capital of the privatization entity has been sold, or if the agreement on capital increase has been concluded; 27. Debt-equity swap (conversion) is a measure for the preparation and disburdening the privatization entity according to which the claims of creditors are converted into a permanent stake in the capital of the entity to be privatized. 3

4 28. State creditors are as follows: public enterprise, Tax Administration, National Pension and Disability Insurance Fund, National Health Insurance Bureau, National Directorate for Commodity Reserves, Development Fund of the Republic of Serbia and other national authorities and organizations, including the Autonomous Province of Vojvodina and local selfgovernment units. The Deposit Insurance Agency shall also be considered a state creditor when performing the function of bankruptcy trustee during bankruptcy of banks and when administering on behalf and for the account of the Republic of Serbia, with claims of the Republic of Serbia arising from assumed foreign liabilities; 29. Secured creditors are creditors who have claims secured by a mortgage or lien on the assets of the privatization enterprise, as well as creditors who through a final court decision became entitled to be settled out of the entity s movable or immovable assets; 30. Suspension of procedure is applied in case of awareness of circumstances unknown at the time of initiating the proceedings and which completely prevent the sale of capital and/or assets of the privatization entity; 31. Control of buyer's obligations under the agreement is control exercised by the Agency so as to verify the performance of the buyer s contractual obligations; 32. Bankruptcy aimed at completing privatization is a bankruptcy proceedings initiated by the Agency against the privatization entity, with due reasons for bankruptcy under the provisions of this law and the Law on Bankruptcy, and for the purpose of completion of privatization. Relation to Other Laws and Enforcement of the Provisions of this Law Article 3 The provisions of this law shall apply to privatization entities with the seat in the territory of the Republic of Serbia. If this Law governs an issue that any other law regulates differently, the provisions of this law shall prevail. Notwithstanding paragraph 2 of this Article, the provisions of this law shall not apply to sports organizations, media founders, the companies for professional rehabilitation and employment of disabled persons and the companies registered for the production of weapons and military equipment, unless the laws governing the status of these companies stipulate the application of provisions of this law. In the process of privatization, the provisions of the law governing companies on disposal of the high values assets shall not be applied and there will be no separate decisions on the sale of assets. 4

5 Principles of Privatization Article 4 Privatization is based on the following principles: 1) Creation of conditions for economic development; 2) Reduction of negative fiscal effects; 3) Ensuring openness to the public and transparency; 4) Prevention of corruption; 5) Formation of selling prices at fair market conditions; 6) Creation of conditions for social stability. Subject of Privatization Article 5 Subject of privatization shall be considered as follows: 1) socially owned or public capital and/or assets of companies and other legal entities, including public enterprises; 2) public equity expressed in stakes or shares; 3) stakes and shares transferred to the Agency after the termination of the agreement on the sale of capital concluded between the Agency and a buyer; 4) assets in companies referred to in Article 3 of this paragraph; 5) stakes and shares of the Shareholder Fund, as well as of the Development Fund of the RS and the Pension and Disability Insurance Fund, when sold together with shares or stakes of the Shareholder Fund. Subject of privatization may be the land entered in a relevant real estate rights registry as social, mixed or property of the subject to be privatized. The subject of privatization may not be natural resources, goods in general use, goods of general interest, as well as cultural assets under public ownership entered in the register of cultural heritage, which shall be conducted in accordance with the law governing cultural property. Mandatory Deadline for the Implementation of Privatization Article 6 Privatization is mandatory for the entities with socially-owned capital. Socially owned capital of the privatization entity must be privatized no later than 31 December The privatization of public capital and assets of entities that operate with public capital shall be implemented based on the decision adopted by the Government, competent authority of the autonomous province or local self-government unit. Privatization procedure is deemed implemented if a agreement on the sale of capital is concluded and if all requirements are met for the transfer of ownership of capital, envisaged by the sales agreement (payment of the purchase price, delivery of the bank guarantee, registration 5

6 of change of ownership in the relevant register), including the Asset Sale Program (hereinafter: Program). Entities Responsible for the Implementation of Privatization Article 7 The Privatization Agency is a legal entity that conducts and controls the process of privatization in accordance with the law. Ministries, securities depository and clearing house, the registry responsible for the registration of business entities and liens, registries authorized for registration of real estate rights and other agencies and organizations, shall all within their jurisdiction and given the activities of certain privatization entities, and at the request of the Agency, provide professional, technical and other support to the effective implementation of the privatization process and submit data and documents within their authority free of charge. Privatization Models Article 8 Privatization models are as follows: Sale of capital; Asset sale; Transfer of capital free of charge; Strategic partnership; Privatization Methods Article 9 The method of sale of capital and/or assets is public collection of bids with subsequent public bidding. The capital of privatization entities expressed in shares may be sold: 1) in accordance with the law governing the securities market; 2) by accepting a takeover bid in accordance with the law governing the acquisition of joint stock companies. Methods of privatization via transfer of capital free of charge shall include: 1) transfer to employees; 2) transfer to strategic investors in accordance with this Law and regulations governing FDI incentives. Method of privatization through strategic partnership implies public collection of bids. 6

7 Combination of Multiple Methods and Models Article 10 A combination of multiple methods and models may be applied in the privatization process for more efficient implementation of this procedure. Measures for Disburdening and Preparation of Privatization Entity Article 11 Measures for disburdening and preparation of privatization entity may include: - conditional debt write-off; - debt-equity swap (conversion). Measures referred to in paragraph 1 of this Article may be determined only in the case of sale of capital or strategic partnership through privatization entity s capital increase. Buyers in Privatization Process Article 12 In terms of the provisions of this law, the Buyer may be a domestic or foreign legal or natural person. Only domestic legal or natural person may be the buyer of agricultural land. Domestic or foreign legal or natural persons may unite in order to purchase a privatization entity or establish a strategic partnership (hereinafter: Consortium) and may authorize an individual to represent them. A buyer who is a member of the consortium may not be: 1) a domestic legal entity operating with majority socially owned capital; 2) a natural person, legal person and founder of a legal entity, who has outstanding obligations towards the privatization entity up to the date of the public invitation announcement; 3) a natural person, legal person and founder of a legal entity with whom a sales agreement or a strategic partnership has been terminated due to non-fulfillment of contractual obligations; 4) a natural person who has been convicted of criminal offences against life and person, property crimes, economy crimes, official duty crimes, offences against public health, and offences against public order and peace, which are punishable with imprisonment of five years or more, or against whom criminal proceedings has been instituted for those offenses; The buyer of the parent or subsidiary company which is undergoing privatization may not own a subsidiary or controlling company operating with socially owned capital. A participant in the privatization process who has been declared a buyer or strategic investor, who fails to take all the necessary actions and sign a contract in accordance with this Law, shall lose the status of a buyer or strategic investor and the right to participate in future privatization procedures and the right to deposit return. Neither family member of the participant who has lost the status of a buyer, nor any legal entity founded by him, shall have the right to participate in the privatization process. 7

8 Family members, as defined in paragraph 6 of this Article, shall be considered descendants, spouse or common-law partners and parents of the participants. The Buyer may not be a company in which the person referred to in par. 3. item 2), 3) and 4) of his Article is considered a controlling member or controlling shareholder, in terms of the law governing the companies. The purchaser may neither be the subject of privatization, nor a subsidiary. Limitations referred to in par. 3-9 of this Article shall apply to strategic investors as well. The Buyer or strategic investor, in terms of the provisions of this law, can not be a natural person, legal entity, and the founder of the legal entity who has lost the status of a buyer in accordance with the Law on Privatization ("Official Gazette of RS", nos. 38/01, 18/03, 45/05 123/07, 123/07-oth. law, 30/10-oth. law 93/12, 119/12, 51/14 and 52/14 - CC), or a buyer s family member, in terms of paragraph 7 of this Article. Obtaining the Opinion and Consent Article 13 Prior to concluding an agreement, the Agency shall obtain from the competent antimoney laundering authority an opinion on obstacles the buyer or strategic investor may encounter when concluding the agreement. The opinion referred to in paragraph 1 of this Article shall be submitted no later than 15 days from the date of receipt of request by the Agency. The Agency shall no later than three days after signing the agreement submit to the competent organization for the money laundering prevention a written notice that agreement has been concluded with a buyer, as well as a written notice of payment no later than three days after the payment of the purchase price. The Agency shall, at the request of the competent authority for the prevention of moneylaundering, promptly make available or submit any documentation at its disposal, which was created in the process of concluding the agreement or in the process of implementation of the agreement, and thus comply with the instructions given by the competent authority. The Right to Challenge Article 14 A participant in the privatization process has the right to challenge the legality of the procedure within eight days following the procedure. The complaint shall be submitted to the Ministry in charge of economic affairs through Privatization Agency, and the competent Ministry shall decide on the complaint within eight days of the receipt thereof. Adopted decisions regarding complaints are final. Administrative dispute proceedings may be initiated against the act referred to in paragraph 3 of this Article. Means of Payment in Privatization 8

9 Article 15 Payment in privatization may be carried out in domestic or foreign convertible currency. Privatization Costs Article 16 Costs of privatization shall be actual costs incurred in the implementation of the privatization process, in accordance with the law. The Agency shall be entitled to reimbursement of expenses, referred to in paragraph 1 of this Article, not exceeding 5% of the sales price. The minister responsible for economic affairs shall prescribe the amount and type of expenses that are recognized in the amount of actual costs referred to in paragraph 1 of this Article. Proceeds from Privatization Process Article 17 Proceeds from the sale of capital and/or assets in the privatization process shall be paid to the Agency account. Proceeds from the sale of socially owned capital shall be transferred to the budget of the Republic of Serbia. Proceeds referred to in paragraph 1 of this Article shall not be subject to forced execution. Proceeds referred to in paragraph 1 of this Article, achieved through the sale of capital of privatization entity after the settlement of costs, shall be transferred to the account of the Republic of Serbia budget, autonomous province or local self-government. Proceeds from the sale of the socially-owned capital shall be used and allocated as follows: 1) 10% shall be paid to the Republic Fund for Pension and Disability Insurance; 2) 50% of the funds shall be earmarked for financing the restructuring and economic development in the territory of the Republic of Serbia; If the company is registered in the territory of the Autonomous Province of Vojvodina, 50 % of the funds shall be earmarked for financing the restructuring and economic development in the territory of Autonomous Province of Vojvodina; 3) 5% of the funds shall be allocated for the payment of compensation to persons whose property was nationalized; 4) 5% of the funds shall be earmarked to finance infrastructure development of local self-government where the privatization entity is located; 5) 30% of the funds shall be allocated for other purposes, determined by a separate decision of the RS Government 9

10 The proceeds referred to in paragraph 1 of this Article, which have been generated from the sale of privatization entity s assets, shall be used in accordance with the Program after the settlement of privatization costs. The proceeds referred to in paragraph 1 of this Article, which have been generated from the sale of shares and stakes owned by the Shareholder Fund, RS Development Fund, and Pension and Disability Insurance Fund shall be transferred to the bank account of the capital's owner after the settlement of privatization costs when sold together with shares and/or stakes of the Shareholder Fund.. II PREPARATION FOR PRIVATIZATION Public Invitation for Collecting Letters of Interest Article 18 The Agency shall announce a public invitation for collecting the letters of interest for all companies from Privatization Agency portfolio no later than 30 days from the date of effectiveness of this law, or within 30 days of launching the privatization initiative for privatization entities for which initiatives had not been submitted by the date of this Law becoming effective, or within 30 days from termination of the agreement on the sale of capital. The public invitation referred to in paragraph 1 of this Article shall contain: 1) Business name of the privatization entity; 2) Information on the structure and value of capital; 3) Description and value of property; 4) Other information relevant to the entity. The deadline for submitting letters of interest is 30 days from the date of the public invitation announcement. The public invitation referred to in paragraph 1 of this Article shall be published on the Agency's website, and a notice of the invitation in at least one widely circulated daily newspaper distributed throughout the territory of the Republic of Serbia. A Letter of Interest contains: 1) Basic information about the interested buyer or strategic investor; 2) An expression of interest for a particular subject and model of privatization; 3) A proposal of the indicative price, the investment program, provisional business plan and the number of full-time employees; 4) Other relevant information specified by public invitation. Initiation of Privatization Process Article 19 Privatization of the entity with socially-owned capital shall be initiated by the Ministry in charge of economic affairs. 10

11 Privatization of the entity with public capital shall be initiated by the Government, the competent authority of the autonomous province or local self-government unit. The competent authorities referred to in paragraphs 1 and 2 of this Article must submit to the Agency an initiative to start the process of privatization within five days from the date of its adoption. The Agency shall submit the initiative under paragraph 1 or paragraph 2 of this Article to privatization entity within five days after the competent authority has submitted it to the Agency. Inventory and Assessment Article 20 Privatization entity is obliged to make an inventory and assessment of the fair market value of all assets, liabilities and capital as of December 31 of the last business year, in accordance with the law governing the accounting and in line with international accounting standards, within 45 days from the date of announcement of public invitation for collection of letters of interest under paragraph 18 of this law, and to submit relevant data to the Agency within such deadline. For privatization entities with initiated privatization procedure after this law entry into force, the deadline referred to in paragraph 1 of this Article shall start from the date of delivery of the privatization initiative to privatization entity. If it has been determined that there are assets of the enterprise, which are not shown in the privatization documentation, the Agency shall hire a certified property appraiser to conduct an assessment. The costs of assessment referred to in paragraph 3 of this Article shall be borne by privatization entity. If the agreement on the sale of capital is concluded with the buyer, and subsequently assets of the enterprise that had not been registered in the privatization documentation are found, the buyer shall pay to the Agency an amount which shall be determined by multiplying the following elements: - The estimated value of newly discovered assets (reduced by the value of the pledge, when newly found property is encumbered by mortgage prior to the sale of capital) and; - Ratio of the asset's purchase price and the capital valuation that was used in the sale of capital. The buyer is obliged to pay to the Agency the amount referred to in paragraph 5 of this Article within 30 days of the Agency's notification of the sum. If the buyer does not express interest in buying the property referred to in paragraph 3 of this Article, the property shall be transferred to the Republic of Serbia. The Agency shall transfer funds referred to in paragraph 5 of this Article in accordance with Article 17, paragraph 4 hereof. Decision on the Model and Method of Privatization, Initial Price and Measures for Disburdening and Preparation of Privatization Entity Article 21 11

12 The Agency shall propose to the Ministry in charge of economic affairs a model and method of privatization, measures for disburdening and preparation of the entity undergoing privatization, within 45 days from the expiry of the deadline for submission of the letters of interest. The Agency shall propose the adoption of a decision on the model, method and measures for disburdening and preparation of privatization entities, if the expressed interest of the investors is acceptable and if the viability of the entity's business (provisional business plan) is positively assessed. If conditions referred to in paragraph 2 of this Article are fulfilled, the Agency shall propose the decision on the model, method and measures for disburdening and preparation by assessing the following criteria: - value of capital and assets; - strategic importance of privatization entity; - the number of employees. The Agency shall, within 30 days after the deadline referred to in paragraph 1 of this Article, notify the Ministry in charge of economic affairs of the entities that have not received an acceptable expression of interest or have not received any letter of interest within the deadline referred to in Paragraph 1 of this Article. Based on the proposal referred to in paragraph 1 of this Article, the ministry in charge of the economic affairs shall adopt a decision establishing the model and the method of privatization, (hereinafter: decision on the model and method), the initial price, and propose measures for disburdening and preparation of privatization entity, within 30 days of the submission of proposal by the Agency. For the entities operating with majority capital of the Republic of Serbia, the Government shall render the decision on the method and model of privatization upon proposal of the ministry in charge of economic affairs within the deadline referred to in paragraph 5 of this Article. For the entities operating with majority capital of the autonomous province and local selfgovernment, the competent body of such autonomous province and local self-government shall render the decision on the method and model of privatization, upon proposal of the ministry in charge of economic affairs, within the period referred to in paragraph 5 of this Article. The Agency shall notify the entity of the model and method decision within 5 days from delivery of such decision to the Agency. For privatization entities classified as micro legal entities according to the laws governing accounting, with terminated agreements on the sale of capital, the Agency shall render the decision on the model and method of privatization or adjudicate the initiation of bankruptcy proceedings. The Government shall decide on the model of strategic partnership and the manner of its implementation. Modification of the Model and Method Decision Article 22 If circumstances arise in the implementation of privatization that result in the inability to implement the method and model decisions, the Agency may propose an amendment of the privatization model and method. 12

13 The procedure referred to in Article 21 of this Law shall be applied to the adoption of new decisions. III PRIVATIZATION METHODS Public Collection of Bids with Subsequent Public Bidding Article 23 Method of public collection of bids with subsequent public bidding is a privatization method for the sale of capital and/or assets of privatization entity. The method referred to in paragraph 1 of this Article shall be realized by submitting bids and through public bidding of participants in accordance with this Law and the sales documents. Sales Documents Article 24 Sales documents in the process of public collection of bids with subsequent public bidding shall include: 1) Confidentiality Agreement; 2) Privatization documents; 3) Instructions to Bidders; 4) Application form for participation in the process of collecting public bids with subsequent public bidding; 5) Draft Sales Agreement. Privatization documentation referred to in paragraph 1, item 2) of this Article shall be prepared by privatization entity and submitted to the Agency within 30 days of the date the Agency notified the entity of privatization model and method. The person authorized to represent the privatization entity shall be responsible for the accuracy and completeness of the submitted privatization documents under criminal, moral and material liability. Criteria for Participation in Public Collection of Bids with Subsequent public Bidding Article 25 Criteria for participation in public collection of bids with subsequent public bidding, terms of sale and buyer's obligations (investment, social program, business continuity, etc.) shall be determined by the Agency, with the approval of the ministry responsible for economic affairs. 13

14 The ministry in charge of the economic affairs shall give consent referred to in paragraph 1 of this Article, within 15 days of the Agency's delivery of criteria and conditions of sale. If the ministry in charge of the economic affairs does not agree with the proposal of the Agency, it shall determine the criteria, conditions of sale and the buyer s obligations and notify the Agency within 15 days of the Agency's delivery of criteria and conditions of sale. If the ministry in charge of the economic affairs does not submit its consent within the term referred to in paragraph 2 of this Article, the process shall continue in accordance with the Agency's proposal. Public Invitation Article 26 The Agency shall prepare and publish a public invitation for the sale of capital and/or assets of privatization entity. Public invitation contains the business name of the company, details on structure and value of the capital, description and value of capital and/or assets, initial price for the sale of capital and/or assets, deadline for submission of participation applications, as well as other information relevant to the implementation process. The public invitation referred to in paragraph 1 of this Article shall be published in at least one widely circulated daily newspaper distributed throughout the territory of the Republic of Serbia and on the website of the Agency no later than 30 days before the date stipulated for submission of applications. Purchase of the Sales Documents Article 27 A person who has expressed an interest to participate in public collection of bids with subsequent public bidding shall be required to purchase the sales documents. The minister responsible for economic affairs shall set the price of the sales documents referred to in paragraph 1 of this Article. Commission for Conducting Public Collection of Bids with Subsequent Public Bidding Article 28 Public collection of bids with subsequent public bidding shall be conducted by the Commission for Conducting Public Collection of Bids with Subsequent Public Bidding (hereinafter: Commission), which shall be appointed by the Agency. The Commission shall have three members and shall include: a representative of the Agency, a representative of employees in the privatization entity and a representative of the ministry responsible for economic affairs. A person complying with the following requirements may be appointed as a member of the Commission: - five years of working experience in economy or privatization; 14

15 - university degree. The person referred to in paragraph 3 of this Article shall be obliged to make a statement that he/she is not a shareholder in privatization entity or its purchaser. The Commission shall decide by majority vote of all of its members. The Commission shall take minutes of its work. Initial Price Article 29 The initial price for the sale of capital and/or assets shall amount to at least one-half of the estimated value of capital and/or assets offered for sale. If the capital and/or assets are not sold for the price referred to in paragraph 1 of this Article, the Agency may, with the approval of the competent authority in terms of Article 21 of this Law, publish a new public invitation within 15 days from the day of declaring the sales procedure unsuccessful with a new starting price amounting to at least one-third of the estimated value of capital and/or assets. Application for Participation Article 30 Application for participation shall be submitted to the Agency within the time limit specified in the public invitation, which may not be less than 30 nor more than 90 days from the date of the public invitation announcement. Bids must be equal to or may exceed the initial price. The deposit can be paid in cash or by the first class bank guarantee. The amount of deposit shall be 10% of the estimated value of capital and/or assets. The application of a participant that does not contain evidence of deposit payment shall not be considered. Public Bidding Article 31 Public bidding shall be conducted immediately after the opening of bids, if at least two bidders submitted a bid that is equal to or exceeds the initial price. The highest offered price shall be the starting price at the public bidding, whereas the sales price shall be the highest price achieved in the public bidding procedure. In the event that only one bidder submits a bid, a public bidding shall not be conducted, but instead a contract shall be concluded and the sales price shall be the price offered, which must be equal to or may exceed the initial price. 15

16 Losing the Rights and Status of the Buyer Article 32 If a participant in the public collection of bids with subsequent public bidding, who has been declared a buyer or who has the second highest bid, fails to sign the minutes, fails to conclude the agreement or fails to make the payment within the specified term, it shall lose the status of the buyer and the right to participate in the privatization process and the right of deposit return. Public Collection of Bids Method Article 33 Public collection of bids shall be carried out through announcement of public invitation for selection of strategic investor. The Government shall prescribe the qualification requirements to be met by a strategic investor. The Agency shall publish a public invitation referred to in paragraph 1 of this Article. The public invitation referred to in paragraph 1 of this Article shall be published in at least one widely circulated daily newspaper distributed throughout the territory of the Republic of Serbia and on the website of the Agency no later than 30 days before the date stipulated for submission of applications. Determining the Content of Application Article 34 The content of the application for strategic partnership and the amount of deposit shall be determined by the Government at proposal of the ministry responsible for economic affairs. Authorization of the Government to pass the By-laws Article 35 The Government shall prescribe the conditions, procedure and manner of the sale of capital and/or assets by method of public collection of bids with subsequent public bidding as well as the strategic partnership model. IV SALE OF CAPITAL Subject of Sale Article 36 16

17 The subject of sale shall be 70% of the socially-owned capital to be privatized, unless otherwise regulated by this law or the regulations governing the legal status of business entities and the terms and conditions of performing certain economic and other activities. The percentage of public capital to be privatized shall be determined by the Government, the autonomous province or local self-government unit. If after the sale of the socially-owned capital and transfer of the capital to employees there is still the unsold capital, such capital shall be transferred to the Shareholder Fund Agreement on the Sale of Capital Article 37 Agreement on the Sale of Capital is the adhesion contract which may include the provisions on the following: contracting parties, subject of sale, contracted price and deadline for payment, deadline and amount of investments provided by the buyer, required operations for privatization entity, restricted disposal of assets or capital of the entity to be privatized through alienation and encumbrance, prohibition of reducing the number of permanent employees, the obligation to pay regular salaries to employees, security instruments for duly performed contractual obligations and other provisions. Privatization Agency and the buyer of the capital, as contracting parties, shall sign a record containing a specification of property, rights and liabilities of privatization entity, which is an integral part of the capital sales agreement. The period of contractual obligations is typically two years. Notwithstanding paragraph 3 of this Article, due to the importance of preservation of activities, the contractual obligations period may be termed to three years by the capital sales agreement, at proposal of the relevant ministry in charge of the activities of privatization entity. Agreement on the sale of capital shall be deemed concluded when signed by the buyer and the Agency and certified by the competent authority. The Agency shall submit the agreement on the sale of capital to the ministry in charge of finance for the record keeping within three days of its conclusion. Agreement on the sale of capital shall be available on the official web site of the Agency, within three days of its conclusion On the date of certification of the capital sales agreement, the Agency shall acquire a legal lien on the capital subject to sale, whilst the competent authority shall ex officio be obliged to register that right. The Agency shall, within 15 days from the execution of the Buyer s last contractual obligation, inform the competent registry to delete the statutory lien referred to in paragraph 8 of this Article. Assignment of the Capital Sales Agreement Article 38 17

18 The buyer of the capital (hereinafter: Assignor) may assign the capital sales agreement to a third party (hereinafter referred to as: Receiver), under the conditions stipulated by this law and the law governing contractual obligation relations, with prior approval of the Agency. The Receiver may only be a person who meets the legal requirements for the buyer of the capital. By assigning the capital sales agreement, the Receiver shall become the holder of all rights and obligations under the agreement. The Assignor and Receiver shall be jointly and severally liable to the Agency for the performance of duties under the assigned capital sales agreement. Own Shares Article 39 During the execution of contractual obligations, the capital increase and new shares arising from increase in capital of privatization entity shall be subject to regulations governing the capital increase of companies and capital market, except issues otherwise regulated by this law. The Registry responsible for securities depository and clearing and the Register of Companies shall record the capital increase of privatization entity on the basis of agreed investment when the buyer submits a certificate by the Agency on the execution of the contractual investment commitment. Capital increase of the privatization entity deriving from new share issue provided by a third party during the term of the contractual obligations shall not be permitted. Shares acquired by the buyer from new issues arising from the capital increase of privatization entity during the execution of contractual obligations shall be considered the fully paid own shares of privatization entity. When the buyer of capital fulfils obligations under the capital sales agreement, which fulfillment is verified by the Agency s certificate, the privatization entity that has acquired own shares referred to in paragraph 4 of this Article, shall transfer them free of charge to the buyer from which the shares were obtained. The Agency shall submit to the register in charge of securities the decision under which the own shares are registered on privatization entity, as well as the decision based on which the own shares shall be transferred to the buyer for ex officio registry. The Agency shall submit to the register in charge of registering the companies a decision under which the own stake is registered on privatization entity, the decision based on which the own stake shall be transferred to the buyer for ex officio registry. Conditions for the Termination of the Capital Sales Agreement Article 40 18

19 Agreement on the Sale of Capital shall be deemed terminated due to contract default if, even within the additionally approved deadlines, the buyer fails to remedy the following breaches of contractual obligations: 1) Failure to pay the agreed price in accordance with the sales agreement; 2) Disposal of privatization entity s assets contrary to the provisions of the agreement; 3) Disposal of privatization entity s capital contrary to the provisions of the agreement; 4) Failure to provide guarantees in accordance with the sales agreement; Buyer may be granted no more than three consecutive subsequent deadlines for compliance with one contractual obligation if it has been verified that the buyer had submitted evidence of taking steps to enforce contractual obligations in the previously provided period. Collaterals for proper performance of contractual obligations shall be activated in accordance with the agreement. Legal transaction concluded without the Agency s consent, contrary to the provisions of the sales agreement, shall be null and void. Legal Consequences of the Termination of the Capital Sales Agreement Article 41 In case of termination due to contract default by the buyer, and in order to protect general public interest, the buyer of the capital shall lose the right: - of refund of the amount paid on behalf of the agreed price; - over the entire capital of the privatization entity that the buyer directly or indirectly acquired under the obligations from the sales agreement and any compensation or indemnity under the same, except shares acquired through purchase on the organized securities market. In case of termination of the agreement on the sale of capital, the entire capital referred to in paragraph 1 of this Article including own shares acquired in the capital increase through new stakes, shall be transferred to Privatization Agency. Funds generated from the sale of own shares shall not be paid to the buyer of the capital with whom the sales agreement has been terminated, and the buyer shall lose the right to any remuneration or compensation in respect of assets and rights entered into the privatization entity, which have increased the capital of the entity. Capital Representative Article 42 For privatization entities for which the agreement of sale has been terminated in accordance with provisions of this Law, the Agency, with the approval of the ministry responsible for economic affairs, shall appoint a temporary capital representative (hereinafter: Capital Representative) to manage the privatization entity until the completion of its privatization process. Capital Representative may be a person who meets the following requirements: holds a university degree; 19

20 at least 5 years of experience in the area of business of the privatization entity or in business in general; he/she is not a shareholder in the privatization entity or its buyer; has not been convicted of a criminal offence which is punishable by imprisonment or other criminal offence which makes him/her unfit to perform the duty of a representative; he/she is not a creditor or debtor of the privatization entity. Capital Representative shall manage the privatization entity in proportion to the share of capital which is transferred to the Agency. Capital Representative shall in particular: 1) take necessary measures for the protection of property and capital in privatization entity; 2) manage the operations of the privatization entity as a prudent businessman, and take care of other activities that are needed to prevent the occurrence of damage to assets of privatization entity; 3) take measures to facilitate the completion of the privatization process; 4) performs other duties as required. Capital Representative shall perform entrusted tasks independently, with due care and diligence of a prudent businessman, in accordance with the law. Capital Representative shall be liable directly in the amount of his/her own property, for the damage caused to a privatization entity, if the damage occurred intentionally or through gross negligence. Claims for damages have a five years statute of limitation from the date the damage occurred. Capital Representative s Report Article 43 Capital Representative shall submit to the Agency the following reports: - Monthly reports on the property status and business operations of the privatization entity; - Other reports, at the request of the Agency. The content of reports shall be prescribed by the minister competent for economic affairs. All the reports shall be published on the official web site of the Agency. A monthly report required to be submitted by the Capital Representative, shall give an overview of business performance and operating results in an observed period (month), as well as comparison of that period with the previous period (month), i.e. with the same period (month) in the previous year. Capital Representative s Fee costs. Article 44 Capital Representative shall be entitled to remuneration and reimbursement of actual 20

21 Remuneration costs and reimbursement of actual costs of the Capital Representative shall be borne by the privatization entity in the amount prescribed by the minister competent for economic affairs. Capital Representative Acquittal Article 45 The Agency will acquit Capital Representative if it determines that the Capital Representative does not fulfill the obligations prescribed by this Law and other acts regulating his/her actions. Capital Representative may be acquitted at his/her personal request. Providing conditions for trade of shares Article 46 In case a decision on the sale of shares on the organized market is adopted in accordance with Article 9 paragraph 2 item 1 of this Law, Capital Representative shall be obliged to provide conditions for trading with shares of the privatization entity organized as a joint stock company on the organized securities market, within 90 days from the adoption of the decision. If the Capital Representative fails to ensure share trading conditions, the Agency will send an order to the Belgrade Stock Exchange to include shares on the Belgrade Stock Exchange market. Belgrade Stock Exchange will include entity s shares on the market free of charge and by Agency s order. The Agency will offer shares of the privatization entity for sale in accordance with current market conditions. Shares will be offered for sale for the maximum of 90 days. The capital referred to in Article 41 paragraph 1 and 2 of this Law that is expressed in shares shall be sold with a method of public collection of bids and public bidding. Duties of the Management Bodies of the Privatization Entity Article 47 The management body of the privatization entity shall be obliged to undertake all legal and factual actions in order to enable the Capital Representative to manage the privatization entity, as well as to carry out all the actions necessary for the registration of changes in the registrar competent for companies, and other competent registrars. In case the management body does not act in the manner referred to in the previous paragraph of this Article, all the rights, obligations and competences of the management bodies, including the right to convene the Assembly of the privatization entity in the manner and within time limits envisaged by the law governing the legal status of companies, shall be transferred to the Capital Representative. After termination of the agreement on the sale of capital, the Management Bodies of the privatization entity cannot adopt the following decisions prior to selection of new management bodies: 1) On the company's capital decrease or increase; 2) On the acquisition or disposal of real estate or the high value assets; 21